WASHINGTON – Homeowners with underwater mortgages, in which the value of the home is less than what’s owed on the mortgage, have not been required to pay taxes on the difference between the mortgage balance and the sale price in short sale through 2013, but that could change in 2014, according to a Dec. 25 article in The Washington Post.
Congress has not, as yet, extended the tax ruling that for example, allows a homeowner owing $100,000 on a mortgage to sell it for $80,000 under an agreement with the bank and not pay taxes on the $20,000 difference, which would be considered income unless the regulation is extended into 2014.
Since 2009, more than 220,000 homeowners have sold their houses for less than they were worth through a short sale with help from a government program, the Mortgage Forgiveness Debt Relief Act, according to the Washington Post report.
Across the U.S., more than six million homes are still underwater, according to third-quarter report from research company CoreLogic, according to the article. Despite the large number of homeowners still facing that mortgage issue, that’s down from 11 million homes underwater during the peak of the housing crisis in 2009.